Evaluate the need for outsourcing and discuss its limitations

• The need for outsourcing can be understood by the following points

o Focus on core activities – Outsourcing allows companies to focus on core activities that are core to the companies and important for the company, rest all the activities can be outsourced to other third-party service providers

o Cost reduction - To remain competitive, cost-cutting is important, many companies outsource their manufacturing to the developing and underdeveloped where labour is available cheap to cut down the production cost.

o Growth through alliances- Companies outsource some of the activities of other organisations and use there expertise and alliance, by this company also don’t need to make any investment and get access to their knowledge and skills.

o Stimulate economic development – Outsourcing provides an opportunity for entrepreneurs to start a new business which boosts the economy and provide employment to other people.

• Limitations of the outsourcing are mentioned below

o Confidentiality – You need to share a lot of vital and important information to the service providers and they have information about your business process. If the outsourcing partner does not preserve the information properly, it can be outsourced to the other business partner and can harm business.

o Ethical concern – for cost-cutting companies outsource the production and manufacturing to developing or underdeveloped countries, where child labour are used, work condition ate good and gender-based wages discrimination, which is not ethical as indirectly companies are using child labour for cost-cutting.

o Resentment in the country – when one company outsource its activity of another country from where they can get these services cheaper, it causes resentment in the home country as the job of home country people are outsourced to the other country.